Dual-core processors highlight opportunity in smartphone commotion

Mike DanoThe dramatic upheaval in the smartphone and portable device market has helped redefine the competitive landscape. A few years ago the mobile phone industry was dominated by the likes of Samsung, Nokia (NYSE:NOK), Motorola (NYSE:MOT) and Sony Ericsson. Today, it's a much different scene, with Apple (NASDAQ:AAPL) and Research In Motion (NASDAQ:RIMM) pushing Motorola and Sony Ericsson out of the rankings of the top five global handset makers, and Nokia struggling to gain footing.

This upheaval isn't confined to just the vendors themselves. The market's pace has mothballed a number of previously hot companies, topics and products--think MediaFLO, Windows Mobile and WAP.

Nvidia is a good example of a company on the upswing portion of this trend. Nvidia made a name selling graphics processors to computer makers including Apple, Dell, Hewlett-Packard, Acer, IBM and Lenovo. Five years ago the company realized the mobile industry would soon become an important playground for silicon vendors, and worked to leverage its computer learnings into the mobile realm.

Today, there's quite a bit of buzz around Nvidia's movements onto the smartphone scene, primarily via its Tegra 2 dual-core smartphone processor. LG--the world's third largest handset vendor by volume and Nvidia's first major mobile phone customer--last week announced the world's first phone powered by a dual-core processor, the Optimus 2X running Nvidia's Tegra 2. Toshiba, Malata, Viewsonic, Notion Ink, Advent and KNO have already announced tablets running Tegra 2.

"The word on the street is that Tegra 2 will be in upcoming cellphone models from Motorola, HTC and LG," Forward Concepts chip analyst Will Strauss recently wrote. "Moreover, tablets and pads based on Tegra 2 will be rolling out from Motorola and LG, and perhaps others."

Nvidia's Tegra 2 platform appears poised to gain the kind of name-recognition that Qualcomm's (NASDAQ:QCOM) Snapdragon processor enjoyed this year.

"We're a small business in a very good position to ramp pretty hard," explained Mike Rayfield, general manager of the mobile business at Nvidia. "We don't look at this as making a better phone. This is about the next generation of computing."

But what's so great about dual-core processors? Basically, the architecture produces faster processing alongside lower power consumption. For example, if a phone's navigation application is running concurrently with a streaming audio application, the OS can assign the navigation task to one CPU core and the streaming audio task to the second CPU. Interestingly, Nvidia said smartphones running its Tegra 2 dual-core processor sport the same processing power as a regular laptop circa 2004.

"It allows you to have a much snappier response," concluded Nvidia's Rayfield.

Nevertheless, Nvidia faces an uphill climb. Strategy Analytics estimated that Texas Instruments, Qualcomm, Samsung, Marvell, Renesas and ST-Ericsson cumulatively accounted for 98 percent of smartphone applications processor unit shipments in the first half of 2010. (Standalone applications processors accounted for just 29 percent of total smartphone applications processor revenue during the period, the firm said.)

"However, we think there is enough room for dynamism in the smartphone applications processor market as new players such as Nvidia, Intel, Broadcom and MediaTek are all set to attack the high-growth smartphone market with focused efforts in 2011," said Strategy Analytics' Sravan Kundojjala.

Not surprisingly, market leaders Qualcomm and Texas Instruments have promised their own dual-core processors in the near future as well.

As the smartphone market continues to gallop along, I expect further disruption among vendors for phones, chips, services, applications and elsewhere. Each curve along the innovation highway presents openings for upstarts and potential pitfalls for incumbents. Companies that seem cemented in their position could be left in the dust within months. --Mike

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